PowerPoint Presentation: Sept. 8, 2004 -- TV 2010


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  • 49% of HUT; 81% of cable households
  • 49% of HUT; 81% of cable households
  • 49% of HUT; 81% of cable households
  • Rising programming costs Operational efficiencies (clustering, box swaps, headcount, etc.)
  • PowerPoint Presentation: Sept. 8, 2004 -- TV 2010

    1. 1. TV 2010 Communications Studies 197C Sept. 6, 2004
    2. 2. Consumer Good to Divisible, Editable Asset 1980’s 1990’s 2000’s 2010’s 2020’s Nintendo home video game -- 1981 Internet Bubble Blockbuster expansion starts 1987 Broadband AOL Founded - 1985 Pay per view starts - 1985 ?????? Megaplexes - 1995 Mergers PVR’s Wireless media? Consumer Products Channel Explosions Digital
    3. 3. How Did We Get Here? <ul><li>Changing economics of television networks </li></ul><ul><li>Regulation and Technologies… </li></ul>Cable Satellite PVRs
    4. 4. How Do I Receive Thee? <ul><li>Over the Air? </li></ul><ul><li>Cable? </li></ul><ul><li>C-Band? </li></ul><ul><li>Ku-Band – DirecTV, Dish (Echostar)? </li></ul><ul><li>Cable Modem or DSL? </li></ul>
    5. 5. New Distribution Windows <ul><li>1889 : Kinetoscope </li></ul><ul><li>1895 : Cinematographe (exhibition) </li></ul><ul><li>1939 : NBC Television (network television) </li></ul><ul><li>1975 : HBO (pay television) </li></ul><ul><li>1976 : TBS Superstation (basic cable) </li></ul><ul><li>1976 : Betamax (home video) </li></ul><ul><li>1985 : Viewer’s Choice (pay-per-view) </li></ul><ul><li>2001 : CinemaNow; MovieLink (internet downloading) </li></ul>
    6. 6. Video Media: Time Shift from Broadcast TV to Cable & Satellite Source: Veronis Suhler Stevenson, MPAA 1988 2002p
    7. 7. History of Cable – 1948 Birth to 1960’s Halt by FCC <ul><li>1948 --Arkansas, Oregon and Pennsylvania -- enhance reception of over-the-air TV mountainous or remote areas </li></ul><ul><ul><ul><li>“ Community antennas” (CATV) on mountain tops or high points; homes connected to antenna towers to receive signals </li></ul></ul></ul><ul><li>1952 – 70 “cable” systems served 14,000 subs, mostly 100 mile radii </li></ul><ul><li>1953 – Microwave relays began </li></ul><ul><li>Late 1950’s – Carriage begins of “distant signals” </li></ul><ul><li>1962 – Almost 800 cable systems served 850,000 subscribers </li></ul><ul><ul><ul><li>Westinghouse, TelePrompTer and Cox invested </li></ul></ul></ul><ul><ul><ul><li>Entrepreneurs: Bill Daniels, Martin Malarkey, Jack Kent Cooke </li></ul></ul></ul><ul><li>1963 -- Carter Mountain Transmission Corp. v. FCC </li></ul><ul><li>1966/68 -- FCC restricted carriage of distant signals in top 100 markets </li></ul>
    8. 8. 1970-80’s – FCC and Satellite Effects <ul><li>1972 -- Cable Television Report and Order -- FCC gradual deregulation; protected local stations' exclusive rights to syndicated programming </li></ul><ul><li>1972 -- Charles Dolan & Gerald Levin of Sterling Manhattan Cable launched Home Box Office (HBO). </li></ul><ul><ul><ul><li>National satellite distribution system used a newly approved domestic satellite transmission </li></ul></ul></ul><ul><ul><ul><li>TV station, owned by R.E. &quot;Ted&quot; Turner, was distributed by satellite to cable systems nationwide, and soon became known as the first &quot;superstation,&quot; WTBS </li></ul></ul></ul>
    9. 9. Compulsory License – Key in the Lock <ul><li>1976 – Law granted cable operators compulsory license to make distant broadcast signals available to its subscribers and to establish royalty rates to be paid by cable operators </li></ul><ul><ul><ul><li>At that time, many copyright owners and broadcasters were unwilling to make their programming available to cable subscribers.  </li></ul></ul></ul><ul><ul><ul><li>Congress created a statutory licensing mechanism that provided an efficient way to license copyrighted material and ensured that copyright owners received payment for use of their programming </li></ul></ul></ul>
    10. 10. 1980s/90s – The Cable Act(s) <ul><li>1980 – nearly 16 million households subscribed </li></ul><ul><li>1984 – 1984 Cable Act – relaxed framework, attracted investment; 1984-1992, $15 billion was spent on wiring systems </li></ul><ul><li>1989 – nearly 53 million households subscribed; cable networks increased from 28 in 1980 to 79 by 1989 </li></ul><ul><li>1992 – 1992 Cable Act – enabled competition from wireless cable and DBS, responding to price increases </li></ul><ul><li>1995 – 139 national cable networks available </li></ul>
    11. 11. 1990s -- New Money & Businesses <ul><li>1996 – Telecommunications Act of 1996 – increased competition </li></ul><ul><ul><ul><li>AT&T entering the business in 1998, though exiting four years later by merging with Comcast in 2001 </li></ul></ul></ul><ul><ul><ul><li>Paul Allen, a founder of Microsoft, began acquiring his own stable of cable properties. </li></ul></ul></ul><ul><ul><ul><li>America On-Line merged with Time Warner and its cable properties </li></ul></ul></ul><ul><li>1998 – 171 national cable networks available </li></ul><ul><li>1996-2002 -- $65 billion spent on upgrading systems with fiber optic and coaxial cable – “broadband” networks </li></ul>
    12. 12. Cable Now <ul><li>73.7 million basic subscribers as of 1Q04 </li></ul><ul><li>Digital cable could be found in 22.9 million homes (31%) </li></ul><ul><li>Subscribership to high-speed Internet access service via cable modems had grown to 17.3 million by 1Q04 (up 35% vs 1Q03) </li></ul><ul><li>2.7 million customers were using cable for their phone connections 1Q04 (up slightly) </li></ul><ul><li>By 2002, about 280 nationally-delivered cable networks were available, with that number growing steadily </li></ul>
    13. 13. US HH Penetration of Video Media Sources: Nielsen Media Research-NTI; TVB; Census Bureau; MPAA; Kagan; NCTA, Adams Research
    14. 14. Cable Numbers You Should Know <ul><ul><li>U.S. HH -- 110.4 million (Jan. 2004) </li></ul></ul><ul><ul><li>U.S. TV HH – 108.4 million (Jan. 2004) (98% of HH) </li></ul></ul><ul><ul><ul><li>1 rating point = 1% of TV HH </li></ul></ul></ul><ul><ul><li>Basic cable HH – 73.9 million (Jan. 2004)(68% of TVHH) </li></ul></ul><ul><ul><li>VCR/DVD Homes – 98.4 million (91% of TVHH) </li></ul></ul><ul><ul><li>Digital cable HH – 20.6 million (est. as of June 2003) </li></ul></ul><ul><ul><li>Satellite (DSS) – 20.35 million (est. as of March 2003) </li></ul></ul><ul><ul><ul><li>Includes 11.4 million DirecTV subs and 8.4 million Dish Network subs </li></ul></ul></ul><ul><ul><li>DVR penetration = 2% of TVHH (as of Aug. 2003, Yankee Group) </li></ul></ul>
    15. 15. Cable Systems: Different Economics than TV Stations <ul><li>Monthly Fees by Tier </li></ul><ul><ul><ul><li>Basic Tier(s) </li></ul></ul></ul><ul><ul><ul><li>Pay Services </li></ul></ul></ul><ul><ul><ul><ul><li>Multiplexing </li></ul></ul></ul></ul><ul><ul><ul><li>Pay per View, VOD, Other Services </li></ul></ul></ul><ul><li>Advertising </li></ul><ul><ul><ul><li>By Network </li></ul></ul></ul><ul><ul><ul><li>“ Interconnect” by Local Systems </li></ul></ul></ul><ul><ul><ul><ul><li>Fractured Ownership by Market </li></ul></ul></ul></ul><ul><li>Installation </li></ul><ul><li>Late Fees </li></ul>
    16. 16. Avg . Basic Cable Network: 50/50 Split Source: Kagan Research; 2003
    17. 17. A Large Ad Pie to be Fighting Over 2003 U.S. Advertising, $ million Source: Universal McCann/TVB
    18. 18. Cable Advertising – Growth Source: TVB
    19. 19. Cable Advertising – Long-Term Growth Source: TVB/Universal McCann
    20. 20. Dominant Cable Operators (MSOs) Source: Kagan Research, LLC Top 10: 49% of HUT; 81% of Cable HH 59,294,800     720,800 CableOne 10   1,293,600 Insight Communications 9   1,543,000 Mediacom Communications Corporations 8   2,167,000 Bright House Networks 7   2,944,000 Cablevision Systems Corporation 6   5,469,800 Adelphia Communications 5   6,338,300 Cox Communications 4   6,431,300 Charter Communications 3   10,919,000 Time Warner Cable 2   21,468,000 Comcast Cable Communications ( info) 1   Subscribers MSO Rank
    21. 21. Concentration of U.S. Distribution Pipes <ul><li>MSO’s (Multiple System Operator) </li></ul><ul><li>In millions </li></ul>Comcast (ATT) Time Warner Charter Cox Adelphia Cablevision Echostar Dish DirecTV 21.4 11 6.5 6.3 5.2 3 “ Voom” 8.8 11.5 = 54 million = 80 % of the cable subscriber universe
    22. 22. Top Cable Networks by Ratings Source: Kagan Research, LLC     986,000 0.9 Discovery 1,010,000 0.9 Fox News 1,018,000 0.9 ESPN 1,243,000 1.1 Toon Disney 1,247,000 1.2 Lifetime 1,319,000 1.2 TBS 1,391,000 1.3 Disney 1,742,000 1.6 Nick/NAN 1,828,000 1.7 USA 1,984,000 1.7 TNT TVHH Primetime Rating Cable Network
    23. 23. Top Cable Networks by Revenue Source: Kagan Research, LLC     $762.7 MM $735.6 MM Disney Channel $776.2 MM $763.1 MM TBS $790.0 MM $744.8 MM Lifetime $858.2 MM $798.3 MM CNN $933.1 MM $883.2 MM USA $998.5 MM $860.2 MM MTV $1,189.5 MM $1,022.4 MM Fox Sports $1,244.1 MM $1,088.0 MM Nickelodeon $1,502.1 MM $1,320.8 MM TNT $2,871.6 MM $2,449.1 MM ESPN 2003 Revenue 2002 Revenue Cable Network
    24. 24. Important Facts: Cable Financial Model <ul><li>Cable financial model depends on popularity of net </li></ul><ul><ul><li>New nets typically have to pay per sub fee to get carriage </li></ul></ul><ul><ul><li>Popular nets (ESPN) get per sub fee from MSO </li></ul></ul><ul><ul><ul><li>ESPN rates at around $2/subscriber (or more) </li></ul></ul></ul><ul><ul><ul><li>Comcast’s total programming costs per sub per month (as of 1/13/2003) were $14.87 </li></ul></ul></ul>
    25. 25. Satellite – Late to the Party <ul><li>1988 – Congress enacted the Satellite Home Viewer Act (“SHVA”) to ensure that subscribers to satellite services would have access to broadcast signals.   </li></ul><ul><ul><ul><li>At that time, satellite TV service consisted of the large C-Band dishes that were primarily in rural areas.  </li></ul></ul></ul><ul><ul><ul><li>C-Band peaked at 2.4 million subscribers in 1995, but has dropped to below 500,000 </li></ul></ul></ul><ul><li>In 1994, the Direct Broadcast Satellite (DBS) service became available to consumers – has grown to over 21 million subscribers </li></ul>
    26. 26. Reaching the US TV Consumer Source: Nielsen 2002; weekly cume
    27. 27. Fragmented Competition: Number of US Cable & Satellite Channels Source: Screen Digest 1994: Launch of Digital Satellite 1997: Launch of Digital Cable
    28. 28. Cable TV & Satellite -- US <ul><li>Direct Broadcast Satellite – 15.8% US households (up from 13.8% 7/02) </li></ul><ul><li>Wired Cable - 70.3% of US Households, down from 67.9% 7/02 (back to 4/96 levels) </li></ul><ul><li>58 TV markets now have Alternate Delivery system penetration of 25% or more </li></ul><ul><ul><ul><ul><li>Springfield, MO 46% </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Dallas/Ft. Worth 38% </li></ul></ul></ul></ul>
    29. 29. US Channels Available Doesn’t Materially Impact 14-19 Channels Watched Source: Nielsen, National People Meter Sample 8/01; TVB
    30. 30. How Do Cable Channels Compete? <ul><li>Marketing </li></ul><ul><li>Niche Programming – repackaged, syndicated, used across platforms </li></ul><ul><ul><li>HGTV, Discovery, History, MTV, ESPN </li></ul></ul><ul><li>Repurposing (co-owned networks; quick reruns) </li></ul><ul><li>Original Programming </li></ul><ul><ul><li>FX: The Shield, Nip/Tuck </li></ul></ul><ul><ul><li>Bravo: Queer Eye for the Straight Guy </li></ul></ul><ul><ul><li>ESPN/Fox: Sports programming </li></ul></ul><ul><ul><ul><li>More Expensive! </li></ul></ul></ul><ul><li>Off-Network Programs </li></ul>
    31. 31. Network Concentrated Landscape Turner ABC/ESPN MTV Networks Discovery Fox NBC Scripps 10 10 19 13 8 6 4 <ul><li>CNN Fin </li></ul><ul><li>CNN Int </li></ul><ul><li>Cartoon </li></ul><ul><li>TBS </li></ul><ul><li>TNN </li></ul><ul><li>TNT </li></ul><ul><li>CNN </li></ul><ul><li>TCM </li></ul><ul><li>Disney </li></ul><ul><li>ESPN </li></ul><ul><li>Toon Disney </li></ul><ul><li>SoapNet </li></ul><ul><li>VH1 </li></ul><ul><li>Comedy </li></ul><ul><li>MTV </li></ul><ul><li>Nick </li></ul><ul><li>TV Land </li></ul><ul><li>Spike </li></ul><ul><li>Noggin </li></ul><ul><li>Animal Planet </li></ul><ul><li>En Español </li></ul><ul><li>Learning </li></ul><ul><li>Discovery </li></ul><ul><li>excluding regional) </li></ul><ul><li>Fox Movie </li></ul><ul><li>FX </li></ul><ul><li>Fox News </li></ul><ul><li>Fox Sports </li></ul><ul><li>Nat Geo </li></ul><ul><li>CNBC </li></ul><ul><li>CNBC world </li></ul><ul><li>MSNBC </li></ul><ul><li>Bravo </li></ul><ul><li>Food </li></ul><ul><li>HGTV </li></ul><ul><li>DIY </li></ul><ul><li>Fine Living </li></ul>
    32. 32. 2 3 2 3 3 <ul><ul><li>A & E </li></ul></ul><ul><ul><li>History </li></ul></ul>A & E AMC E! Lifetime USA <ul><li>WE </li></ul><ul><li>AMC </li></ul><ul><li>Lifetime </li></ul><ul><li>LMN </li></ul><ul><li>USA </li></ul><ul><li>SCI Fi </li></ul><ul><li>HSN </li></ul>Independent Channels Golf Channel Hallmark Weather QVC Oxygen IFC <ul><li>Style </li></ul><ul><li>E! </li></ul>
    33. 33. Recent Off-network Programs to Cable Source: Kagan Research, LLC $75K 96 CBS TBS Fox Yes, Dear 2004 $150K 61 WB ABC Family Warner Jamie Kennedy 2004 $200K 66 ABC TNT Buena Vista Alias 2005 $280K 100 NBC FX NBC Fear Factor 2004 $400K 66 WB ABC Family Warner Smallville 2004 $600K 264 NBC Lifetime Paramount Frasier 2006 Fee/episode Eps. Orig. Network Cable Network Syndicator Program Year Avail.
    34. 34. U.S. Changing – How about other Countries? <ul><li>Different cable/satellite mix </li></ul><ul><li>National programming – culture </li></ul><ul><li>Reality Show – Global Impact </li></ul><ul><li>Ownership concentration </li></ul><ul><li>Interactive TV – U.K. (Sky TV), Israel (cable) </li></ul><ul><ul><ul><li>Competitive advantages </li></ul></ul></ul>
    35. 35. Digital Customization for Local Appetites – MTV brand extensions
    36. 36. Current Challenges? <ul><li>Vertical & Horizontal Integration </li></ul><ul><li>New Services </li></ul><ul><li>Reality (previous kings included game show) </li></ul><ul><li>Advertiser support – Integration – Product Placement </li></ul><ul><li>Reruns & Cable Repurposing </li></ul>
    37. 37. Vertical & Horizontal Integration <ul><ul><li>Comcast - AT&T (failed bid for Disney) </li></ul></ul><ul><ul><li>News Corp. buys DirecTV </li></ul></ul><ul><ul><li>Adelphia up for sale </li></ul></ul><ul><ul><li>Intensifies competition: more at stake, more pieces to maneuver </li></ul></ul>
    38. 38. Competition Driving New Services <ul><ul><li>Cable launching VOD (difficult for satellite, inefficient upstream path) </li></ul></ul><ul><ul><li>Satellite counters with DVR, calls it VOD (cable launching DVR too) </li></ul></ul><ul><ul><li>Cable offers broadband and voice (satellite teams with DSL, RBOCs) </li></ul></ul><ul><ul><li>HDTV - advantage for satellite in short-run, capacity issues later; regulatory local “must-carry” considerations </li></ul></ul><ul><ul><li>ITV and custom IPGs next (Murdoch’s success with BSkyB) </li></ul></ul><ul><li>Retail prices kept at bay for now </li></ul>
    39. 39. People Meter Controversy <ul><li>Nielsen is trying to record what people watch every 15 minutes to determine rating with 2,000 households </li></ul><ul><li>Challenges now that sample is unrepresentative of total population (higher end house skew). </li></ul><ul><li>Boxes just tell if the TV set is on, not whether a person is there actually watching it or not. </li></ul><ul><li>Issues that have arisen with technology is that there are multi-set households, VCR and Tivo which alter when people watch, etc. </li></ul>
    40. 40. Reality Show – Winner of 2003/04 Season <ul><li>9 of the top 20 top-rated shows among adults 18-49 were reality shows. </li></ul><ul><li>A reality show was the top-rated show in the key demo for ABC (&quot;The Bachelor“), NBC (&quot;The Apprentice,&quot; tied with &quot;Friends&quot;), Fox (&quot;American Idol&quot;) and UPN (&quot;America's Next Top Model&quot;). </li></ul>Source: Variety 5/27/04
    41. 41. Reality Show Economics <ul><li>How American Idol makes $ </li></ul><ul><li>Ad spots (network, national spot, local spot, cable insertions) </li></ul><ul><li>Sponsors </li></ul><ul><li>Concerts </li></ul><ul><li>Albums </li></ul><ul><li>Cell phone </li></ul><ul><li>Syndication of idea to other countries </li></ul><ul><li>Low Cost & No Reruns or Traditional Syndication (except Reality Show Network) </li></ul>
    42. 42. DVDs -- TV Episodics Releases Source: Video Store Magazine Market Research 2003 TV Episodics are the latest goldmine for Studios who will be expanding the category for the next few years as they mine their deep TV catalogs.
    43. 43. Digital Television & High Def (HDTV) <ul><li>Rule change in 1997 allowed broadcasters to hold onto their analog channel until 85 percent of Americans have made the DTV transition. </li></ul><ul><li>End of transition </li></ul><ul><ul><li>December 31, 2006 or when 85 percent of U.S. TV households have the capability to receive Digital TV signals (whichever is later ) </li></ul></ul><ul><li>Digital Must Carry?? </li></ul>
    44. 44. Distribution: Changing the Basic Economics of Television? <ul><li>Broadband: 24% of households </li></ul><ul><ul><ul><li>Cable 15.9 mm, DSL 10.4 MM 1Q94 </li></ul></ul></ul><ul><ul><ul><li>Cable 60+% of all broadband customers in U.S </li></ul></ul></ul><ul><li>Voice over IP (VoIP) </li></ul><ul><li>Video On Demand (VOD) </li></ul><ul><li>Satellite Surge </li></ul><ul><ul><ul><li>Cable TV Subs declined 63,000 1Q04 </li></ul></ul></ul><ul><ul><ul><li>DirecTV -- Murdoch took over Dec. 03 </li></ul></ul></ul><ul><ul><ul><ul><li>Europe -- Sky TV </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Asia -- STAR TV </li></ul></ul></ul></ul><ul><li>Echostar (Dish +) </li></ul><ul><li>Tivo / PVRs </li></ul>
    45. 45. Media 2010 <ul><li>How fragmented? </li></ul><ul><li>How much piracy? </li></ul><ul><li>How much band to the home? Who controls it? </li></ul><ul><li>How much will the consumer be willing to spend each month? </li></ul><ul><li>How do advertisers get their impressions to the home? </li></ul><ul><li>How much band OUTSIDE the home? </li></ul><ul><li>How portable does media become? </li></ul><ul><li>How personalized? </li></ul>